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Validus Upped to Strong Buy - Analyst Blog

Posted: 12/30/2013 6:20:00 PM
Referenced Stocks: AON;MMC;VR;WSH

On Dec 28, Zacks Investment Research upgraded Validus Holdings, Ltd . ( VR ) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

Validus has witnessed rising earnings estimates on the back of solid earnings results. Moreover, this insurance broker delivered positive earnings surprises in the last 4 quarters with an average beat of 24.2%. To return value to its shareholders, the company increased the share repurchase authorization to $500 million. The long-term expected earnings growth rate for this stock is 14.9%.    

In the last reported quarter, Validus's non-GAAP earnings per share came in at $1.56, surpassing the Zacks Consensus Estimate by 21%. An improvement in top line, driven by higher net premiums earned, aided the outperformance.

Underwriting income of Validus increased 16.5% year over year with combined ratio improving 300 basis points.

With regard to enhancing shareholder value, the board of directors of Validus approved an increase in share repurchase authorization to $500 million. The company spent $1.58 billion to buy back 53.4 million shares since the inception of the share repurchase program. It is hence left with $483.1 million remaining under its authorization.

Its dividend yield of 3.04% betters the industry average of 2.95%, as well as that of some other insurance brokers like Marsh & McLennan Companies, Inc. ( MMC ) with a yield of 2.07%, and Willis Group Holdings Public Ltd Co. ( WSH ) with a yield of 2.51%.

The Zacks Consensus Estimate for 2013 increased 0.4% to $5.84 per share over the last 30 days. The estimate translates to a year-over-year increase of 79.1%. For 2014, the same rose by 1.3% to $5.28 per share over the same time frame.

Another Stock to Consider

Another insurance broker worth considering is AON plc ( AON ), carrying a Zacks Rank #2 (Buy).

AON PLC (AON): Free Stock Analysis Report

MARSH &MCLENNAN (MMC): Free Stock Analysis Report

VALIDUS HOLDING (VR): Free Stock Analysis Report

WILLIS GP HLDGS (WSH): Free Stock Analysis Report

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Zacks Investment Research